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April 29, 2010 11:28
Myers: GAMCO in for long haul no matter AGM results, Gabelli says
- GAMCO wants Myers management to appropriately allocate cash flow
- Still believes in the merits of Myers' automotive business
GAMCO Investors will continue its efforts to nominate members to the Myers Industries (NYSE: MYE) board no matter the results of the company’s annual general meeting, GAMCO head Mario Gabelli said.
GAMCO holds a 10.31% stake in Myers. The activist investor has nominated three people to the board to be voted on by shareholders during the 2010 AGM on 30 April.
“I think it is appropriate to be persistent. We will be here this year; we will be back next year and the following year until we see that allocation of cash flow is consistently applied,” Gabelli told this news service.
In a September 2008 13-D filing, GAMCO indicated to the Myers board its displeasure with the “company’s use of cash flow, and corporate governance, such as poison pills.” Myers’ largest shareholder has reiterated that the company’s automotive division is a valuable and growing business.
Myers’ board has disagreed. In 2009, the company hired KeyBanc Capital Markets to review strategic alternatives for the division. So far, Myers has sold two businesses out of five within the auto segment. A source close to Myers said the company’s auto segment has been perceived as a "collective point of anxiety,” referencing the sector’s performance over the past 12 months.
That said, this source acknowledged the auto sector is beginning to see an improvement. Myers does not want to sell its three auto businesses until the company can garner “full value” for the units, the source said.
The company operates in four segments: material handling, 36.2% of total revenue in 2009; lawn and garden, 28.5% of revenue; automotive and custom, 12.2% of revenue; and distribution, 23.25% of revenue. Myers' total revenue in 2009 stood at USD 701m.
According to Gabelli, the auto component business is a good cash-generating business that can be leveraged into other things. Citing a platform of 300m cars in the US, he said Myers can use its knowledge of distribution to grow the business substantially. He pointed to companies like AutoZone (NYSE: AZO) and O'Reilly Automotive (NASDAQ: ORLY) that have created growth businesses from their core competence.
“These are examples of people who stuck to their knitting and made a ton of money,” Gabelli said. He does not intend to impose his ideas on the Myers management and the board, but he would like the company to at least scout for new ideas. “This is a shareholders' company, not the directors,” he reiterated.
Meanwhile, Gabelli said Myers has been diverting its cash flow to buy, among other things, a flower plant business. “I am saying to myself what kind of returns am I going to get as a shareholder? And then I worry how they are going to allocate cash going forward.”
On 10 March this year, Stephen Myers, the former chairman and director of Myers who holds a 7.77% stake in the company, announced his resignation from the board after he was not nominated as a director for the 2010 AGM. He stated publicly that he was not nominated because he voted against the board’s recommendations at the AGM last year.
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